Procurement Supply Chain Trends for 2024

The start of a New Year always seems to bring out feelings of reinvention as well as an opportunity to look ahead. And it seems that plenty of you were in this frame of mind back in January. But, now this is more of a retrospective, how many of these trends did we get right? Now is the chance to revisit our Number 4 article of the year and give us a performance review!

As global supply chain complexity increases, procurement pros must deal with challenging trends for 2024 and beyond.

Logistics costs are rising across the board, with companies reporting a 19.6 percent increase between 2022 and 2021. While cost containment has been a priority for supply chain management, organizations must take a more holistic view to ensure their inbound supply chain is positioned for success.

Long-term challenges, including a shortage of skilled workers, sustainability, resilience, and the influence of technology, will be top of mind for procurement leaders involved in supply chain management. The New Procurement Playbook sheds light on the challenges and conditions currently faced in 2023, offering valuable insights and actions for your procurement team to succeed in 2024.

We’ll review the top supply chain trends that procurement organizations will face in 2024.

Staffing Challenges

Labor shortages will impact most industries, especially warehousing and trucking, for your organization as well as logistics providers. In The Procurement Playbook, the Great Resignation was one of the top five procurement pressures for 58% of the respondents. Hiring and retaining procurement staff continues to get harder – 47% of procurement leaders said their teams have decreased in number.

The workforce is changing as the aging population makes voluntary exits and new generations take their place. Younger workers value flat hierarchies and expect to use modern IT systems in their daily work. Expectations for salaries, benefits, and management styles are evolving as well. Some aspects of transportation, such as truck drivers and railroad workers being away from home for long periods, are simply part of the job.

Logistics companies compete for labor with higher pay and other incentives, but job seekers are now in the driver’s seat.

Sustainability Regulations

Although ESG concerns often take a backseat to daily challenges, 66% of procurement teams marked it as their second biggest pressure. 

Today’s vigilant stakeholders won’t accept the “We didn’t know” excuse for suppliers violating environmental and social regulations. Companies are faced with increasing pressure from multiple groups to focus on environmental and social impact in their operations. Companies are expected to proactively collaborate with suppliers to improve their mutual environmental and economic performance.

In the global economy, regional regulations are proliferating, adding to the complexity. Procurement teams must ensure suppliers comply with the UK Modern Slavery Act, the EU Corporate Sustainability Due Diligence Directive, the German Supply Chain Act, the US Uyghur Forced Labor Prevention Act, the California Transparency in Supply Chains Act, and many others.

Procurement teams often lead the way on sustainability practices, so the pressure to ensure compliance will only heat up.

Building Resilience

Supply chain disruptions seem to have fallen or at least stayed the same, but 65% of procurement teams still face moderate to heavy pressure from disruptions and shortages, according to the Procurement Playbook survey. The Covid pandemic revealed the need for a resilient supply chain — one that can stretch and bend but not break. It may snap back into a different shape, but it should be adaptable to respond to disruptions. Other than a container ship getting wedged in the Suez Canal, most disruptions gather speed over time. For example, you can watch the news for signs of political unrest or labor actions.

While you can’t prepare for every possible disruption, you can build a system that allows you to adapt on the fly to keep operations running at some level. The strategic decision to create a resilient supply chain can outweigh an emphasis on cost when the overall financial impact of disruption is part of the equation.

Supply Chain as a Service

Your company may excel at marketing and product development but not have deep supply chain management expertise. Outsourcing some or all of your supply chain helps your company focus on its core competencies. Companies turn to logistics services providers such as third-party logistics providers (3PL) and fourth-party logistics providers (4PL) to manage inbound and outbound transportation, warehousing, distribution, and other vital functions.

Experienced providers allow you to access their knowledge and expertise to manage your inbound freight spend. You can eliminate waste, optimize spending, and boost freight receiving efficiency. Many companies don’t want to invest in the technology and expertise to participate in the ongoing supply chain digitization.

Crossing Silos With Technology

Large companies may use multiple systems that don’t talk to each other very well. Data and operations are separated into silos, causing inefficiencies and a lack of transparency due to these artificial buffers. These multiple systems slowed information flow and decision-making, leading to high IT costs.

Companies are turning to do-it-all ERP systems or looking for better ways to connect systems and people. The adoption of Software-as-a-Service (Saas) solutions helps build collaborative workflows that break through the silos. 

Almost half (44%) of the procurement teams in the New Procurement Playbook survey are implementing more technology-based solutions to lower labour costs and drive efficiency for their remaining staff. 

Diversifying Global & Regional Supply Chains

The pandemic taught the procurement world that a diverse supplier base is the foundation of a resilient supply chain. Companies need a mix of global and regional vendors. Some industries are re-shoring or near-shoring production to stabilize their supply chain, even if costs are higher. The value proposition depends on the dynamics of your industry – the answer may be different for automotive manufacturing vs. consumer packaged goods. 

One popular recession-proofing strategy is to source alternative suppliers, ideally those that are more affordable. The power of competition can help cut costs from suppliers facing their own headwinds.

Adopting Automation

The drive for lower costs and the ongoing labor shortage are paving the way for the adoption of automation in warehouses and distribution centers. Warehouses are already deploying robots that crawl up racks to put away and pick items, guided vehicles that deliver products to human packers, and conveyors that sort packages by barcodes. 

One interesting startup uses remote operators for warehouse material handling equipment, similar to military drone operations. A single driver can operate equipment in multiple locations for greater utilization and efficiency.

It’s easy to spot the physical uses for automation. Digital transformation is also underway as companies link warehouses with ERPs and other platforms. Robotic process automation and artificial intelligence-enhanced software will automate manual, siloed processes.

Taking Cyber Security Seriously

Early in 2023, over 1,000 ocean vessels were affected by a ransomware attack on critical software for ship management. Ports, oil tankers, trucking companies, and other essential elements of the logistics industry have been targeted. Some attacks cause little disruption; others incapacitate companies, such as the Maersk cyberattack, which cost more than $300 million to mitigate.

Cyber attacks lead to ransom demands, theft of intellectual property, personal information and more. Hackers may lock up your data to extract payment or sell information to competitors during a bidding process.

Your personnel are the weakest link in the defence against cyberattacks. So, it is highly recommended that your organization institutes regular training for staff on recognising attacks like phishing emails. Organizations have to get it right every day; the bad guys can take their time finding their way around your security systems.

To meet the challenges of 2024, responsible supply chain managers must be prepared to react in real-time to changing conditions supported by automation, actionable data, and automated decision-making. 

You’re Living the New Normal

The new normal is there is no normal. Planning for supply chain disruptions is the only way to create a strategy to win a world where supply chain disruption is the norm. Responsible supply chain managers must be prepared to react in real time to changing conditions.

Tech investment is only part of the equation. You must help build and foster an innovative culture, put the right people in place to implement innovation, and bring it all together to exceed your customer demands and expectations.